As Deficits Grow, States Abandon Tax Exemptions for Energy-Efficient Automobiles

Revenue has taken priority over the environment in cash-strapped states.

Tax exemptions for eco-friendly automobiles are becoming more and more scarce as states fear losing some much needed revenue, USA Today reports.

Action on New Jersey legislation that would exempt cars that get more than 40 miles per gallon and energy-efficient appliances from the state's 7 percent sales tax now appears unlikely, according to the newspaper. The two-year proposal would have cost about $79 million while the state faces an $8 billion budget deficit.

Connecticut's nearly 20-year-old tax break for energy-efficient vehicles was ended in 2010. The state estimated it was losing up to $2 million each year and is dealing with a $3 billion deficit, USA Today reports.

RELATED

In Washington, a state sales tax exemption for hybrid and high-efficiency cars was allowed to expire in January. In South Carolina, a $2,000 tax credit for purchasing a hybrid ended. In New Mexico, a tax break for high-mileage vehicles was eliminated in 2009, according to the newspaper.

On the federal level, a tax credit for up to $3,400 expired in December 2010. Some estimates have hybrid cars making up 2.5 percent of the overall auto market, USA Today reports.